Santa Cruz is one of California’s most sought-after locations for property investments. Its 2023 sale-to-list price ratio shows buyers were willing to pay more to land a property. It also proved to be a seller’s market in 2023, meaning there’s more demand than the available supply. It’s a profitable environment for sellers and a competitive one for buyers.
If you want to ride the exciting waves of the Santa Cruz housing market, it pays to understand its nuances. That way, you can navigate its competitive environment strategically, whether as a buyer or seller.
Current Market Overview
The Santa Cruz median home price displayed minimal changes between 2022 and 2023. That shows the market is stable, and real estate properties hold their value well. The competition in 2023 also remained high as properties sold swiftly.
Median Sale Price and Trends
According to Realtor.com, Santa Cruz’s median listing price was $1.5 million in 2023, showing an 11.7% decrease year on year. Meanwhile, its median sale price was $1.2 million, and its median price per square foot was $983.
Santa Cruz’s median listing price is on a downward trend but remains higher than the national average. The strong demand for property exceeds the supply of homes in Santa Cruz, explaining the high median prices.
The breathtaking landscapes and high standard of living are other factors that drive up the numbers in this coastal paradise. Expensive housing is one of the main reasons for the high cost of living in Santa Cruz, CA.
Market Competitiveness
The Santa Cruz real estate scene stayed competitive in 2023. Redfin gave it a score of 64, rating it “somewhat competitive.” Properties in Santa Cruz went pending in around 34 days and were off the market in 48 days. There were 28 houses sold in November 2023, an increase from the 19 sales the previous year.
The sale-to-list price ratio is another indicator of Santa Cruz’s stability. It was at 100.2% in 2023, showing that sellers had leverage and buyers were willing to go slightly above the asking price. Given the high demand and stiff competition between buyers, sellers in Santa Cruz can enjoy excellent return on investment.
Factors Influencing the Market
Santa Cruz is an attractive city for homebuyers and a lucrative one for sellers. But before investing in its real estate market, here are some factors you should consider:
Migration and Relocation Trends
Many consider Santa Cruz one of the best places to live in the country for its mild climate, surf culture, and proximity to nature. According to Redfin, 77% of Santa Cruz homebuyers were keen on staying in 2023.
The other 23% were curious about other locations like Sacramento, Seattle, and Los Angeles. Meanwhile, 3% of homebuyers across the U.S. showed interest in Santa Cruz. Most of them were from State College, Jackson, and Champaign.
Environmental Factors
Santa Cruz is gaining popularity among remote workers seeking a well-balanced coastal lifestyle. Abundant in state parks, beaches, and hiking trails, Santa Cruz immerses residents in natural beauty.
But that doesn’t mean there are no environmental challenges. Homebuyers everywhere are experiencing the impact of climate change, and Santa Cruz is no exception. Poor air quality, extreme weather conditions, and wildfires are some of the risks residents face.
Transportation and Accessibility
The easiest way to get around Santa Cruz is by biking or driving. Owning a vehicle would be convenient, but you can also rent from various providers in the city. Almost everything is accessible within 15 minutes. If you’re heading to Monterey or San Francisco, you can take Highway 1 for the most scenic drive.
While there’s no shortage of parking, the fees aren’t cheap. The public bus system offers a more affordable way to get to places. There are eight bus routes within Santa Cruz and a ninth one that will take you to San Jose. Single bus fares are $2, but you can purchase multi-day passes. The Santa Cruz METRO is another option.
You can also walk because there are plenty of pedestrian-friendly areas. But you’d have to use a mode of transportation at some point because Santa Cruz is too big to explore on foot.
Market Predictions for 2024
While the Santa Cruz real estate market is strong, it’s subject to economic uncertainty like all other residential areas. Here’s a look at Santa Cruz real estate trends and some 2024 predictions that can help you make strategic moves:
Mortgage Rates Trends
Mortgage rates in California hit an all-time low in 2021 but were higher than ever in 2023. According to Bankrate, 2024 opened at 7.10% for 30-year fixed mortgages. Meanwhile, 15-year loans were at 6.33%. That’s a steep increase compared to 2021’s lowest of less than 3%.
The mortgage rate increase can potentially turn off buyers because the Santa Cruz market is already expensive. Not everyone can afford a 20% downpayment and a possible 8% mortgage rate. Some are leaving the market and waiting for rates to go down. Meanwhile, others are using this opportunity to purchase a home while there’s less competition.
Looking to 2024, real estate experts believe that rates will drop. It’s just a matter of time. We might never see a 2% mortgage rate again, but a slight decrease can lead to huge savings.
Home Price Projections
According to the predictions for the Santa Cruz Metropolitan Statistical Area (MSA), there will be a 1.7% decrease in median listing prices by the end of February 2024. Prices dropped year on year in 2023, and experts expect the downward trend to continue. The forecast estimates a 3.2% decrease by the end of November 2024.
As the supply of properties increases, you can expect housing prices to decrease. However, homes in the more competitive areas of Santa Cruz will likely hold their worth better.
Home Value Trends
According to Zillow, the average home value in Santa Cruz was $1,297,659 by the end of November 2023. That’s a 0.3% increase from the year before. This upward trend is unlikely to have an impact on housing prices. As supply increases and demand drops in the face of high mortgage rates, prices will likely dip even with higher home values.
Demographic Influence on the Market
Santa Cruz is an attractive area not just for Baby Boomers. Homebuyers are from different walks of life, from young families to retirees. There’s also an influx of remote workers wanting to live an active lifestyle surrounded by nature.
Millennial Homebuyers
Millennials currently hold the most purchasing power in the U.S. However, there has been a drop in millennial homebuyers in Santa Cruz in recent years. That’s most likely the result of the growing interest rates and the wave of Silicon Valley layoffs. Millennials grew up with the recession mindset and are extra cautious in these unpredictable times.
While millennials are often called entitled, they’re actually frugal homebuyers. They prioritize affordability over comfort and are willing to purchase older and smaller homes. Also, millennials don’t see homeownership as a status symbol but as an entry to adulthood. Gaining independence is more valuable to them than the actual house. In addition, they don’t usually live in the same home for more than 10 years.
Market Snapshot By Property Type
It’s not cheap to own a slice of heaven in the coastal paradise of Santa Cruz. It’s known for sprawling luxury homes with breathtaking ocean views. But if you’re working with a tighter budget, you can consider smaller home options like condominiums and townhomes.
In August 2023, single-family homes in Santa Cruz had a median sale price of $1.2 million. That’s more than double the national median of $420,000. Meanwhile, the condos and townhouses in Santa Cruz residential areas had a median sale price of $797,000.
That also exceeds the country’s average. Homes are selling higher in Santa Cruz than in other parts of California and the U.S., reflecting the growing demand for coastal living.
Santa Cruz Real Estate in Market 2024: Is It a Good Time To Invest?
Santa Cruz is currently a seller’s market, so it’s a great time to sell property and enjoy high returns. The demand is higher than the supply, giving sellers leverage in house prices. However, expect listing prices to dip slightly in 2024 as supply increases.
Buyers might be more at a disadvantage given the soaring mortgage rates. But if you’re strategic, you can use that as an opportunity to swoop in and secure the home you’ve been eyeing. More buyers are exiting the market, meaning less competition for you. You can also wait it out, as experts believe mortgage rates will drop eventually.
